Area foreclosures increasing, not at national rates

The number of Americans losing their homes because of an inability to pay continues to grow nationally.

“Foreclosures have become more frequent here, but nothing like other places in the nation,” said Brian Monge, an agent with Jim Maloof Realtor.

The good news is that the problem hasn’t hit central Illinois as badly as it has other parts of the country.

But it’s still a problem that’s plaguing the American economy. More than 80,000 U.S. families lost their homes in April, according to Hope Now, an alliance of mortgage lenders, investors and community advocacy groups. That’s up from 72,000 who lost homes in March, the group stated.

Among the headlines: The nation’s foreclosure rate doubled in 2007; U.S. home values dropped by more than 7 percent last year as new-home sales hit a 25-year low.

The rash of foreclosures serves as a sobering reminder of the subprime loan crisis that’s been making so much economic noise.

The nation’s foreclosure problem is not equally distributed, said Paul Lueken, president of Lombard-based Illinois Association of Mortgage Professionals.

“Four states – Florida, Arizona, Nevada and California – experienced too much home appreciation while three others – Indiana, Ohio and Michigan – are suffering from recession. Those states skew the national foreclosure figures,” he said.

In the Peoria market, foreclosures have been on the rise but still represent a very small percentage of homes – just more than one-half of 1 percent, said Brad Horton, recorder of deeds for Peoria County.

A tightening housing market has aggravated the problem for those who face defaults on house payments, he said. “In the past, people would sell their home to get out from under a loan. But when you can’t sell your house, homeowners get in trouble,” said Lueken.

There were 501 foreclosures recorded in Peoria County in 2007, up from 436 in 2006 and 370 in 2005. So far this year, there have been 203 foreclosures in the county, compared with 172 over the same period last year, said Horton.

“We’ve seen a huge jump (in foreclosures) from March to May,” said Flemming, who works to help families in financial crisis. “We try to get people refinanced, to see if their loan is salvageable,” she said.

While Peoria hasn’t seen rampant foreclosures, some in the area have been hit. “We’ve seen foreclosure activity quadruple from last year,” said Shayla Flemming, senior housing counselor for Metec, a faith-based, not-for-profit organization at Mount Zion Baptist Church, 305 Madison Park Terrace.

The foreclosure problem is not confined to any specific part of the Peoria area, said Becky Peterson, president of the Peoria Area Association of Realtors. “They’re everywhere,” she said.

Sometimes foreclosed homes can sit idle for some time, said Peterson. “It’s a process,” she said, referring to the reselling of a home through a lending institution once the previous owners move out.

Peterson estimated it can take three to six months to move a home through foreclosure.

Foreclosures at record high – more to come

The foreclosure hammer is hitting ever harder. People lost their homes at the highest rate on record in the first three months of the year, and late payments soared to a new high, too – an alarming sign that the housing crisis and its damage to the national economy may only get worse.

Slumping home values are being blamed in large part for the rising tide of foreclosures. Troubled borrowers are left owing more to the bank than their homes are worth. They can’t sell without taking a huge financial hit, so they just walk away.

Dumping more empty homes on an already glutted market also is likely to put a further drag on home prices – extending a vicious cycle.

Watching their home values sink, consumers have pulled back on spending, a factor in the economy’s slowdown.

California, Florida, Nevada and Arizona accounted for 89 percent of the total increase in new home foreclosures, said Jay Brinkmann, the association’s vice president of research and economics. Those are places where prices have fallen sharply and there was a lot of home building, creating too much supply, he said.

“The economy is treading water, and the housing market is one of the undercurrents trying to pull it down,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

Nearly 1 percent, or roughly 447,723 loans, fell into foreclosure during the January-to-March period, the Mortgage Bankers Association said Thursday in its quarterly snapshot of the mortgage market. That surpassed the previous high of 0.83 percent over the last three months in 2007.

The report also found that more homeowners slipped behind on their monthly payments. The delinquency rate jumped to 6.35 percent – or 2.87 million loans – compared with 5.82 percent for the previous three months. Payments are considered delinquent if they are 30 or more days past due.

With prices expected to keep dropping, foreclosures and late payments “are going to continue to go up,” Brinkmann said.

Both the rate of new foreclosures and late payments were the highest on record going back to 1979.

Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers also swelled to all-time highs in the first quarter.

More problems also cropped up with loans to more creditworthy borrowers.

The percentage of subprime adjustable-rate mortgages that started the foreclosure process climbed to 6.35 percent. The rate was 5.29 percent in fourth quarter, the previous high. Late payments rose to 22.07 percent from 20.02 percent, the previous high.

The percentage of such loans falling into foreclosure was 0.54 percent, compared with 0.41 percent at the end of last year. Late payments rose to 3.71 percent from 3.24 percent.

The numbers were higher for those prime borrowers with adjustable-rate mortgages. Initially low rates reset to much higher ones, making it difficult, if not impossible, for homeowners to keep up with monthly mortgage payments. The portion of those loans falling into foreclosure jumped to 1.55 percent from 1.06 percent. The delinquency rate rose to 6.78 percent, compared with 5.51 percent.